CHARTS

Chart Types

There are three main chart types that you can choose between when monitoring the price action of an asset. These are: line charts, bar charts and candlestick charts. Generally there are up to four key pieces of information provided by a price chart.
The Art of the Chart

1. The opening price of the asset.
2. The closing price of the asset.
3. The highest price registered in each period.
4. The lowest price registered in each period.
Let’s discuss and compare the information that the three chart types listed above are able to provide at a glance. Line charts: Line charts use a simple line to represent the upward and downward movement of an asset’s price. Line charts are the simplest of the three to understand, but are only equipped to provide you with an asset’s closing price. Their jagged lines are created by plotting a single point at the closing price of each period, and then drawing a line between it and the next period’s closing price. You will see the end of this line waver as the price changes, only to be plotted as a fixed point when the period has closed. When this happens the line is extended from the last fixed point and will begin to fluctuate until the next close.
Bar charts: The bar charts used on most charting platforms are also known as Western line charts or OLHC charts (short for Open, Low, High, Close). These charts are basically a Western re-working of the Japanese candlestick charts, which we will look at next. Just like candlestick charts they provide you with all four pieces of data listed above. Bar charts are composed of a vertical line and two smaller horizontal lines, one connecting to the vertical line from the left and one from the right side. Each vertical line provides you with the price range the asset moved through in the period of time you are charting at. The bottom of the line represents the lowest point that the price fell to, and the top of the line represents the highest point the price reached. Also, the horizontal line on the left informs you of the asset’s opening price for that period and the horizontal line on the right informs you of the asset’s closing price for the period.
Candlestick charts: Candlestick charts originated in 17th century Japan where they were employed by traders to track changing rice prices. Candlestick charts are the most popular chart type among traders for the simple reason that they are very information dense, efficiently providing you with a great deal of information in a very intuitive and eye-catching way. Each candlestick represents a unit of time at the period being charted. They are composed of a main part, called the ‘real body’, as well as upper and lower ‘shadows’, also known as ‘wicks’. Each candlestick represents the price action that took place within one unit of time frame you are charting at. So at the minute duration each candlestick represents a minute of trading activity, at the monthly duration each candlestick represents a month of trading activity, and so on. Unlike the other chart types we have looked at candlesticks are coloured differently depending on whether they represent a rising or a falling price. If the opening price is higher than the closing price then the body of the candlestick is filled in, in this way traders can easily discern trends as they emerge. The shadows, or wicks, are lines that extend upwards and downwards from the top and bottom of the real body, these represent the highest and lowest prices that were reached within the given time frame.

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